How to Use Crowdfunding to Raise Finance for Your Business

Raising finance for your business with crowdfunding is an increasingly popular option for several reasons. Whether you are starting a business or growing an existing business, it is possible to find the funds you need through an effective crowdfunding campaign.

In this short but informative article we are going to look at the different types of crowdfunding and how you can use them to your advantage. If you are currently trying to raise finance for your business or business idea then this information will be of great use to you!

For those of you who don’t already know, crowdfunding is a method of financing a business via multiple donations from the public or investments from private entities. More and more entrepreneurs are turning to crowdfunding when it comes to raising finance for business, often even before attempting to go down more conventional fundraising routes. This trend can be attributed to the evident success with crowdfunding of a large number of businesses.

Three Types of Crowdfunding for Raising Finance

There are three main types of crowdfunding that you can use when you are raising finance for your business. One is the most common version of crowdfunding in which people will donate money in exchange for a reward. For example, someone who contributes money towards the opening of a new restaurant might expect to receive a free meal if the project comes to fruition. The value of these rewards generally increases alongside the amount of money that is donated. However, people will also often donate money without the expectation of receiving a reward in return.

The second type of crowdfunding is known as equity crowdfunding. This entails people investing money into a business and in exchange they become a shareholder of that business. The benefit to the investor in this case is if the company in question develops into a successful business, then the investor will be able to sell these shares on at a profit.

Loan based fundraising is the third type of crowdfunding. This involves seeking financial support from investors in exchange for interest and a return of their capital at an agreed time in the future. Although this sounds similar to equity crowdfunding, the two are actually regulated slightly differently.

“From the beginning, I have maintained that crowdfunding will become an investment standard, the go-to system to raise funds and one of the best methods for sound return of investments.” - David Drake, LDJ Capital

Easier Access to Funds

Crowdfunding has simplified the process of raising finance in many respects. It is no longer necessary to be able to create an amazing presentation to pitch to an investor or have the negotiation skills to approach the bank. In fact, it is entirely possible to outsource the management of your crowdfunding campaign to a professional digital marketer and, in doing so, massively enhance your efforts and results.

An Extended Network of Investors

When you are raising finance for your business through crowdfunding, you will have a much larger pool of investors than you would with traditional fundraising. This means that as a business owner you have many more opportunities to reach your targets. There is therefore less pressure to find the ideal investor for your business as you are able to reach out to a wide network of relevant people. As a crowdfunder, your audience is practically anyone who has an interest in your industry and you can reach them with ease via social media.

After having read this you might be itching to get started with your crowdfunding campaign. As you are doing so, it pays to keep the following points inspired by suggestions from Indiegogo in mind:

Data shows that 30 day campaigns work best. This gives you the time you need to reach your targets while also keeping your followers engaged and interested.

Continue to update your page regularly for the duration of your campaign. Any progress or new developments that occur are likely to be of interest to those who are following your campaign so be sure to share!

Working as a team is likely to yield better results. Running a successful crowdfunding campaign can be quite time consuming. Ensure you surround yourself with the right people who will ease the workload instead of adding to it.

Crowdfunding is a real game-changer when it comes to raising finance for your business. It makes the process of raising funds much more interactive and social, not to mention fun! Also, as every online crowdfunding campaign is visible to all, it is easy to find inspiration from successful past campaigns to integrate into your own.

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